Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa brown Witz Jailey. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course on the Bloomberg terminal. This
Speaker 1: is the interview of the day, folks on what we're
Speaker 1: all witnessing, which is across the board commodities lift. Jeffrey
Speaker 1: de Graff of Renaissance emailed me yesterday and said, hey, stupid,
Speaker 1: look at the softs And I did that. I looked
Speaker 1: at wheat corn and the graph is right there up
Speaker 1: as well. Nobody's nailed this like Jeffrey currys at Goldman
Speaker 1: Sachs Global Head of Commodities Research, and just nailed this.
Speaker 1: Commodity lift. Jeff Curry, I want to go to your
Speaker 1: microeconomics at Chicago. I want you to explain to our
Speaker 1: audience the constraint so supplied build that so many commodities have.
Speaker 1: These are tangible things and they are constrained on the
Speaker 1: supply side, where there's some serious in elasticities. Well, we
Speaker 1: have on the supply side. We like to call it
Speaker 1: the revenge of the old economy. We have not invested
Speaker 1: in old economy production capacity in some cases five to
Speaker 1: ten years um. The reason why it returns in the
Speaker 1: new economy were so much better that capital dot redirected
Speaker 1: towards tech. Then you overlay E S G issues on this.
Speaker 1: These sectors are severely start to capital and you take oil. Capex,
Speaker 1: depending on where you are in the world, was down
Speaker 1: foty to sevent in the first half of last year.
Speaker 1: Tell us about the medals. I mean, I understand copper,
Speaker 1: and we're you know, John and I arguing about Jeff Curry.
Speaker 1: Let's stop the show. Do you quote London copper or
Speaker 1: do you quote Chicago copper? London copper. Very good, there
Speaker 1: we go, John, So copper, we get coppers moving up.
Speaker 1: Tell us about the other medals where if price goes up,
Speaker 1: supply doesn't come on, does it. Well, it takes anywhere
Speaker 1: from five to ten years to bring on a new
Speaker 1: copper mine. It's the last of the old school commodities
Speaker 1: that you still dig out of the ground. And that's
Speaker 1: where we have the real demand pushed because you have
Speaker 1: this green capex that's starting to begin to be Um,
Speaker 1: you know it's gonna be behind this energy transition story
Speaker 1: because we now have a blueprint for energy transition in
Speaker 1: the US, Europe and China now something we didn't have
Speaker 1: eight weeks ago. We believe the capex has spanned associated
Speaker 1: with this green capex is going to be somewhere around
Speaker 1: sixteen trillion dollars over the next decade. Put that on
Speaker 1: par with China in the two thousand's China spit ten trillions.
Speaker 1: So in real times about the same, Jeff. We got
Speaker 1: to talk about the energy transition story in just a moment.
Speaker 1: Let's just stay on the metsos for a little bit.
Speaker 1: We have to talk about what's happened in the last
Speaker 1: ten years as well, and it started with joints that
Speaker 1: shift away from volume to value. The act of investment
Speaker 1: we've actually seen in the last decade off the back
Speaker 1: of the top of the last supercycle. Jeff, How profound
Speaker 1: is that when you start to think about the dynamics
Speaker 1: from here on out? Well, I mean all these stories
Speaker 1: have the xact same story. You had, UM, very low
Speaker 1: prices over the last decade, very poor returns in the
Speaker 1: sector under investment, no demand. Now we're adding demand on
Speaker 1: top of no supply, and we're creating really tight market
Speaker 1: whether you're talking medals, energy, agriculture, And at the core
Speaker 1: of the demand story is where the stimulus is going.
Speaker 1: Stimulus over the previous decade operated through the wealth channel
Speaker 1: and benefited higher income households. Today it's benefiting lower income
Speaker 1: households who spend more on commodities. So naturally we're seeing
Speaker 1: a much richer, more cyclical, commodity intensitive demand growth environment. Jeff,
Speaker 1: You've always drawn a distinction between all pace commodities and
Speaker 1: capex commodities and the ones that would do while in
Speaker 1: each environment, where are we now? Both are doing well.
Speaker 1: And the reason why I say that is because at
Speaker 1: this point right now, we have capex going whether it
Speaker 1: is old economy in China to take urbanization from six
Speaker 1: up to we have new economy demand through the investment
Speaker 1: in five G networks, and then we have green economy demand.
Speaker 1: In terms of thinking about energy transition, you overly that
Speaker 1: on top of under investment, you end up with relatively
Speaker 1: tight markets like we're seeing today. Well, Jeff, there is
Speaker 1: a distinction though, going back to the early two thousands,
Speaker 1: and we had the last commodity supercycle when it was
Speaker 1: driven by the boom out of China and it was
Speaker 1: all encompassing. This feels different, especially given the energy transition
Speaker 1: that you guys have been talking about, this idea of
Speaker 1: a transition to green energy. Where does oil fit in
Speaker 1: on this kind of equation? If the prices go up
Speaker 1: too high, don't the oil producers just produce more? Well,
Speaker 1: let's first talk about what happens to oil demand. Somewhere
Speaker 1: around two you begin a slow the demand growth and
Speaker 1: it's not until after the demand growth actually tips over
Speaker 1: and starts to go negative. What that means over the
Speaker 1: next five years, the stimulus effect of all of this
Speaker 1: green spending actually amplifies oil demand. Now, let me ask
Speaker 1: you this. If we know we have a blueprint for
Speaker 1: energy transition and US, Europe and China UM and the
Speaker 1: clock is ticking on oil, are you going to invest
Speaker 1: in long live oil production? The answers know, so, the
Speaker 1: only thing we're going to invest in a short cycle
Speaker 1: production in the US, Middle East and Russia. That's it.
Speaker 1: Everything else is too risky to make investments. So the
Speaker 1: hurdle rate to get investment in the sector substantially higher
Speaker 1: than what it was historically. This is fascinating, this idea
Speaker 1: that because you're going to have so much infrastructure, you
Speaker 1: you will need that much more oil to sort of
Speaker 1: finance it, etcetera. Where do the other commodities, the soft
Speaker 1: commodities that we were talking about, fit into this, given
Speaker 1: the fact that they have more elasticity as Tom was
Speaker 1: talking about, Well, I think it goes back to the
Speaker 1: point where who has been infitting from the current stimulus
Speaker 1: right now? It's lower income households. In fact, if you
Speaker 1: look at consumption by postcode in the US, and we
Speaker 1: can divided up by low income versus high income, you
Speaker 1: had turbo charged demand growth from low income households Darry
Speaker 1: January and of most but most of February, So you're
Speaker 1: seeing that filter through. That group consumes a lot more
Speaker 1: commodities than do the high income households, and that includes livestock,
Speaker 1: which has a big poll on grains and softs. Jeff
Speaker 1: Kurry don't want you to get in trouble with Mr Solomon,
Speaker 1: but I want you to go outside your remit. You're
Speaker 1: Coinlleague Jonas over the decade has been absolutely brilliant about
Speaker 1: pushing back against the high inflation crew the so called
Speaker 1: inflation anistas. Do you see the inflation of your world
Speaker 1: folding over into Jana world or is it discreet? Well,
Speaker 1: when we think about the evidence for cost push inflation,
Speaker 1: it just does not exist. It's always demand pull inflation.
Speaker 1: So the factors that are driving commodity prices um end
Speaker 1: up potentially creating some inflation risk. And I think, you know,
Speaker 1: even yonces at getting up into that two and a
Speaker 1: half percent range as we get into you know, April,
Speaker 1: in in in May, when the cops start to get
Speaker 1: relatively positive. So you know, I think the key issue
Speaker 1: here is that you look at bond yields. Bond yields
Speaker 1: are below two percent, and so even if you get
Speaker 1: to two two and a half percent inflation, these portfolio
Speaker 1: managers that hold these bond positions have a problem. And
Speaker 1: so the demand to hedge commodity and heads that inflation
Speaker 1: risk through commodities is quite high. I think that's part
Speaker 1: of what you're seeing pushing these markets higher right now,
Speaker 1: is that hedging demand to deal with even inflation creeping
Speaker 1: up into that two percent range. Jeff, we gotta finish
Speaker 1: up with some numbers and play the number game. Seventy
Speaker 1: five and Q three on w c I one are
Speaker 1: the big numbers you're looking for. Well, I think in
Speaker 1: terms of looking at demand, demand levels were much higher.
Speaker 1: Um you know in fourth quartering in the environment that
Speaker 1: what we thought, and we're drawing inventory. So the key
Speaker 1: issue is will that inventory draw began to slow down
Speaker 1: and we get in the third quarter and will we
Speaker 1: see a supply response. But I have to emphasize that
Speaker 1: you're Sarreadi Arabia right now. You've already committed to keeping
Speaker 1: production off the market till April, and supply is extremely
Speaker 1: inelastic in the near term, which means, you know, the
Speaker 1: upside risk until we start to see that supply response
Speaker 1: is quite high. Jeff always a clinic and great to
Speaker 1: catch up, sir out of London. Support in London, Jeff
Speaker 1: carry Golmu, SAX, Global head of Commodities Research, appreciated Jeff.
Speaker 1: In Washington, the government putting together at one point nine
Speaker 1: trillion dollar fiscal plan and many prominent economists on the
Speaker 1: left asking a simple question, is it too big? We
Speaker 1: asked those questions to White House National Economic Council Director
Speaker 1: Brian dece in our exclusive interview. We size this based
Speaker 1: on the needs that we see to get shots and
Speaker 1: people's arms, to get the schools reopened and get relief
Speaker 1: to families and businesses out there. And as we look
Speaker 1: at this, we look at the estimates out there of
Speaker 1: not only the output gap, but also the amount of
Speaker 1: pain we see in the labor market. Ten million people
Speaker 1: out of work still in this economy. We think that
Speaker 1: this is appropriately sized and frankly, the right kind of
Speaker 1: economic prescription to what is a unique and really precarious
Speaker 1: moment in our economy. Let's start with where the opposition
Speaker 1: is coming from, where the questions are coming from, and
Speaker 1: let me can talk about the economics. We're talking about
Speaker 1: Larry Summers, a former Democratic Treasury Secretary, Olivia Blanchard for
Speaker 1: me of the I m F and widely considered to
Speaker 1: be a dove. These are not exactly Republican cheerleaders that
Speaker 1: are raising the most the biggest questions of your administration
Speaker 1: right now. And Brian, I just want to get disappointed
Speaker 1: by that that that's where the questioning the opposition seems
Speaker 1: to be coming from. Look, we're having this debate across
Speaker 1: the board, and we welcome the opportunity to explain the
Speaker 1: contours of our plan I think one of the things
Speaker 1: that unique about this economic crisis is that this is
Speaker 1: a unique crisis and a unique pandemic driven recession. And
Speaker 1: so we think about this, what what the economy needs
Speaker 1: from the perspective of more akin to a natural disaster
Speaker 1: than a typical recession. We need to surge resources and support.
Speaker 1: And we've also seen over the past year an approach
Speaker 1: that says let's wait and see and and take incremental
Speaker 1: steps has not worked and has put us in a
Speaker 1: pretty deep hole. So we feel pretty confident on the
Speaker 1: economics that this is the right way to go to
Speaker 1: make the error in the direction of doing something that
Speaker 1: will definitively get our hands around this crisis and drive
Speaker 1: us to a stronger and more dermal recovery going forward.
Speaker 1: Have you spoke it to summers Old Blanche out in
Speaker 1: the last month or so. So we're reaching out to
Speaker 1: economists and economic experts across the board, uh, including including
Speaker 1: the folks you are mentioning. We want to make sure
Speaker 1: that we're getting input from all sides that we're considering arguments,
Speaker 1: and I want to be very clear we take very
Speaker 1: seriously the risks, the economic risks that are out there.
Speaker 1: We spent a lot of time thinking about them, a
Speaker 1: lot of time worrying about them. That's our job. But
Speaker 1: as we assess and balance those risks, we believe that
Speaker 1: the risks of further scarring in the labor market, the
Speaker 1: risk of further extending this economic pain outweigh the risks
Speaker 1: of doing too much, which is really the theory behind
Speaker 1: what we're trying to get done here. You clearly believe
Speaker 1: the risks of a symmetric and Al'm blind raise that
Speaker 1: point in an up D pace a little bit earlier
Speaker 1: in the last week, I think, Brian, I think for
Speaker 1: the individuals that I mentioned before Summers blanche out, the
Speaker 1: risk that they're raising is an inflationary one. What gives
Speaker 1: you the conviction that that's not going to be an issue. Well,
Speaker 1: it's a risk that we're keeping our eye in, and
Speaker 1: certainly it's it's something to consider. But if we look
Speaker 1: at the recent history over the last couple of decades,
Speaker 1: we've seen that the economy has the capability of running
Speaker 1: at stronger paces, and we think that the tools exist
Speaker 1: to manage those risks as we go forward. We can
Speaker 1: debate different ways of measuring the output gap, measuring the
Speaker 1: risks associated with this particular crisis. But if you sum
Speaker 1: it all together, we are at a very precarious and
Speaker 1: unique moment of economic crisis. And that's why we feel
Speaker 1: pretty confident that we will be better off if we
Speaker 1: take these actions definitively. We put ourselves on a trajectory
Speaker 1: to growth, and then we work with the tools we
Speaker 1: have to manage any challenges that we face going forward.
Speaker 1: And many people in the administration of Big keen to
Speaker 1: stress that this is about aid, it's abound relief, it's
Speaker 1: not about stimulus. And I think a question many people
Speaker 1: have had Brian, is how giving a check to an
Speaker 1: individual learned seventy five thousand dollars a year should still
Speaker 1: be considered AID relief and not stimulus. What makes that relief?
Speaker 1: What's that line between relief and stimulus? If I have
Speaker 1: a job and I earned seventy five thousand and you
Speaker 1: send me a fourteen hundred dollar check, why is that relief?
Speaker 1: What is it relief from? Well, I think you need
Speaker 1: to look at the package in its entirety, and if
Speaker 1: you look at the combination of the direct payments that
Speaker 1: you're discussing, unemployment insurance extension, and then targeted support to
Speaker 1: the lowest income families with children and essential workers without
Speaker 1: children in the aggregate. This is a very progressive, progressively
Speaker 1: designed package to provide aid principally to the bottom half
Speaker 1: of the income distribution, with the respect of the families
Speaker 1: that are out there that are middle class families that
Speaker 1: will be getting direct payments. A lot of those people
Speaker 1: are people who have lost jobs. Are one of the
Speaker 1: earners in the family has lost jobs. Others are people
Speaker 1: who are facing additional costs associated with working during a pandemic, childcare,
Speaker 1: other other costs. And this provides a bridge. It provides
Speaker 1: support to get families and businesses through to the other
Speaker 1: side of this pandemic, and to do so in a
Speaker 1: way that we don't they don't have to take on
Speaker 1: additional risk or additional economic costs during the interim. Let's
Speaker 1: talk about that bridge in a different way. There is
Speaker 1: another question as to whether this plan, given its size,
Speaker 1: removes the bridge from getting here to an infrastructure plan
Speaker 1: further down the road now, and I just wanted from
Speaker 1: your perspective, what are the constraints to further fiscal spending
Speaker 1: after this package is being delivered. It goes back to
Speaker 1: the question you raised before. This is a relief plan
Speaker 1: that is designed to provide immediate support to try to
Speaker 1: bridge and get us on the other side of this pandemic.
Speaker 1: I think that there is broad consensus and we've been
Speaker 1: hearing it over the last couple of weeks in the
Speaker 1: outreach and the engagement we've been doing from business communities,
Speaker 1: from labor, from members of Congress, from the Democratic and
Speaker 1: Republican side, that we face very significant divert maintenance, whether
Speaker 1: it's with our physical infrastructure, transportation infrastructure, energy infrastructures we're
Speaker 1: seeing play out in the past week in the events
Speaker 1: in Texas and other wise and otherwise, those deferred maintenance
Speaker 1: challenges are real. They are impeding the competitiveness of our economy,
Speaker 1: particularly in a competitive global environment, as China and other
Speaker 1: countries are investing in their own infrastructure, and there's a
Speaker 1: very strong case for us to be increasing our investment,
Speaker 1: doing it in a way that will create more jobs,
Speaker 1: better jobs, and increase the competitiveness our economy. That's a
Speaker 1: different economic objective, but one that should we are very
Speaker 1: focused on in the presence, very focused on. So just
Speaker 1: with that again, Brian, just to be clear on it,
Speaker 1: I'm just trying to understand what the constraints are in
Speaker 1: your mind to further fiscal spending, whether it's political space,
Speaker 1: whether it's fiscal space, whether it's inflation. What do you
Speaker 1: think the constraints are. Loosely, the perstring is even more
Speaker 1: in the future. Well, I think we have a fiscal
Speaker 1: framework and the President has laid out where if we're
Speaker 1: making permanent investments, those investments should be offset, and he's
Speaker 1: laid out a range of different proposals for how to
Speaker 1: do that. That makes sense in terms of our long
Speaker 1: term fiscal trajectory. If we're looking at temporary investments, particularly
Speaker 1: those that increase productivity UH and help put people back
Speaker 1: to work, improve the quality of jobs, those are investments
Speaker 1: that we need to take a hard look at UH
Speaker 1: at making right now, and in the current interest rate environment,
Speaker 1: we could feel confident that we could make consistent with
Speaker 1: a long term fiscally sustainable framework. So you've brought up
Speaker 1: the current interest right environment. As the President spoke with
Speaker 1: Chairman Palatle, who will hear from a couple of times
Speaker 1: this week. Look, we're we're as an administration in staying
Speaker 1: in contistent contact with the economic officials around the illustration,
Speaker 1: and I'm not going to read out specific conversation the
Speaker 1: Presidence has had. But we're we're in we're in continual contact,
Speaker 1: and we're a monitoring and assessing the markets as you
Speaker 1: would expect, Secretary Yell and leading our efforts and doing so,
Speaker 1: You've jumped back into the political seat very quickly, Brian,
Speaker 1: because that was a very political response to that question.
Speaker 1: So I'll ask it again. Forgive me for doing so.
Speaker 1: Has he spoken to Chairman Pals specifically as the President
Speaker 1: had that conversation with the head of the US Central Bank.
Speaker 1: I'll give you a specific answer. I don't have any
Speaker 1: conversations from the President to read out, so there's no
Speaker 1: read out, there's no conversation. Don't you find that curious
Speaker 1: that we're putting through a massive one point nine trillion
Speaker 1: dollar plan that in the future would depend on where
Speaker 1: interest rates may or may not be in the future,
Speaker 1: and yet the President hasn't had a conversation with the
Speaker 1: chairman of the Federal Reserve. Look Like, as I said myself,
Speaker 1: Secretary Yell and other senior administration officials are staying in
Speaker 1: consistent contact with our economic agencies. Uh, And that's what
Speaker 1: we'll continue to do. Okay, Well, I'm just wondering how
Speaker 1: you frame the relationship with the central Bank in the future.
Speaker 1: Is it different to what we've seen in the previous
Speaker 1: all years, Brian? What will it look like like? I
Speaker 1: think we have an approach to economic policy right now
Speaker 1: that is about addressing the current economic crisis and our
Speaker 1: focus on the fiscal policy response that we need to
Speaker 1: put into place. That's our our overriding focus right now,
Speaker 1: and that's the reason why we're working to get the
Speaker 1: American Rescue Plan passed. A little bit of time catching
Speaker 1: up with the White House National Economic Council's director Briant
Speaker 1: des Right now, this is a joy to give us
Speaker 1: perspective here at a perspective moment. Michael Kushmer joins us
Speaker 1: with Morgan Stanley, the pedigree to Princeton, London School of
Speaker 1: Economics and Columbia. But what's so important here is he's
Speaker 1: the rarest of rare commodities. He has enjoyed a seat
Speaker 1: at Morgan Stanley since time began. Michael Kushma, you walked
Speaker 1: in the door to enjoy the crash of seven. What
Speaker 1: was your crash of seven? Like? It was quite quite interesting?
Speaker 1: I've only been working for several months, and my first
Speaker 1: thought was Austin first out that I was my career
Speaker 1: in Wall Street was going to end pretty pretty quickly.
Speaker 1: But that crisis ended very fast. It did, it got
Speaker 1: It was amazing, folks to see how the markets cleared
Speaker 1: him by December. It was a it was an afterthought.
Speaker 1: Michael Christimern I want to go right now to the
Speaker 1: changes in technology. John and Lisa have a bunch of
Speaker 1: fancy questions. We are in a time of digital social media,
Speaker 1: the technology, the way of the messaging works. How do
Speaker 1: you handle a down draft now versus the way you
Speaker 1: handled it ten years ago or thirty four years ago. Uh, well,
Speaker 1: the whole, your whole, your whole day is longer. You've
Speaker 1: got more information, you've got more action and markets coming
Speaker 1: in London morning or an Asian hours, so you wake
Speaker 1: up in the morning in New York and things can
Speaker 1: be already happening. We see more volatility in treasury market futures,
Speaker 1: sometimes overnight, leading the way into what happens in New
Speaker 1: York during the day. There's large scale demand for US
Speaker 1: dollar bonds on the coming out of Asia and lesser
Speaker 1: degree out of Europe. On a regular basis, affecting credit spreads,
Speaker 1: affecting the level of interest rates on the cross currency basis,
Speaker 1: of affects a lot of demand for for US dollar assets.
Speaker 1: Was all sorts of things going on which links financial
Speaker 1: markets all over the world and relative value and opportunities
Speaker 1: to what's going on everywhere in the world, not just
Speaker 1: what's happening inside the United States borders. Well, here's an upgrade,
Speaker 1: Tom Kaine comes from Jonathan Golub and the team over
Speaker 1: at Credit suis raising his SP five hundred price target
Speaker 1: of forty three hundred from forty two hundred and citing
Speaker 1: the hottest GDP growth in some thirty five years. Forty
Speaker 1: three hundred the new price target a credit swas and
Speaker 1: that goes to the double digit callub Ben Laylor, and
Speaker 1: I also mentioned John Ferroll the distinction of Credit Suite
Speaker 1: that they still like tech. I believe that's what Mr
Speaker 1: Glub is said over the left of being very constructive
Speaker 1: on big tech over the last twelve months when others
Speaker 1: have started to shift rotate towards some other sectors. Just
Speaker 1: add to this, if you can, Michael, on the bond
Speaker 1: side of things, we've been talking about this how self
Speaker 1: limiting a move would be in the bond market if
Speaker 1: it started to infect risk assets sweat. Can you weigh
Speaker 1: in on that absolutely? You know. One of the interesting
Speaker 1: things which has happened over the last twelve months, So
Speaker 1: what had massive recovery in equity prices, Earnings from twelve
Speaker 1: months ago today are probably up. Um. We've had a
Speaker 1: traumatic rise in commodity prices from last last winter to
Speaker 1: where we are where we are today, but many safe
Speaker 1: haven assets are still higher in price or lower yield
Speaker 1: with a guard to bonds, whether the US treasuries, where
Speaker 1: it's corporate bonds, high quality corporate bonds, whether it's UM,
Speaker 1: the yend, the Swiss frank currencies like that would typically
Speaker 1: function as safe haven's. Well, right now we're talking about
Speaker 1: boom times, the commodity prices rising quite sharply the next
Speaker 1: twelve months, the fastest growth we seed in the United
Speaker 1: States in decades. We can see a situation where the
Speaker 1: US economy grows faster than the Chinese economy in two
Speaker 1: thousand twenty one, which I think no one would have
Speaker 1: believed was possible um a year or two ago or
Speaker 1: several years ago. So all these things are are changing
Speaker 1: the narrative of what's what's going on in the world,
Speaker 1: and this boom conditions could could continue. What that means
Speaker 1: is at the levels of interest rates we thought were
Speaker 1: restrictive for the US economy may not be restrictive because
Speaker 1: there's so much fiscal policy coming, there's so much pent
Speaker 1: up spending coming down the pipe. We saw the savings
Speaker 1: respike higher again in the first in January of this year,
Speaker 1: meaning more money is available to be spent later this year.
Speaker 1: So we're talking about a situation with the US economy,
Speaker 1: and we see forecast being raised continuously by various analysts
Speaker 1: on the street and elsewhere, six seven percent this year
Speaker 1: and then again four to five percent again next year,
Speaker 1: which is unheard of in the past years. But there's
Speaker 1: a distinction here between higher rates crimping borrowing and crimping
Speaker 1: growth with one point three percent treasury yields one point
Speaker 1: four percent treasury yields probably won't do, and a reassessment
Speaker 1: of valuations that have gotten very high and specific sectors.
Speaker 1: And that's why Michael Showell was talking about a less
Speaker 1: benign rotation beneath the surface within some of these equity indexes,
Speaker 1: where you actually see some pretty significant losses in the
Speaker 1: high flying stocks. How close are we to that just
Speaker 1: based on valuations relative value? With treasury yields going up well,
Speaker 1: the way the way we look at it is that
Speaker 1: US treasury yields of thing one of the few things
Speaker 1: which still are a lower yield than they were pre pandemic.
Speaker 1: So one point three five tenure treasury is still lower
Speaker 1: than it was called in January, early February, mid February
Speaker 1: last year, what about one point five percent? Real heels
Speaker 1: are a lot lower today, is still than they were
Speaker 1: in September of last year. So the question is, if
Speaker 1: the economy is going to do so well, why are
Speaker 1: these yields so low. Shouldn't they be at least back
Speaker 1: to where they were before? And this is kind of
Speaker 1: why I think the market is coming around to the
Speaker 1: idea that we didn't think yields could rise as much
Speaker 1: as they have, But they may rise more because they
Speaker 1: still look low relative to the imply growth forecasts we
Speaker 1: see in other assets, and the Fed may be happy
Speaker 1: with that. Might be they will be Michael Kushma Morgan
Speaker 1: Stanley see of Global fixed income how much to Dolga
Speaker 1: joins us. He's with John Hopkins Center for Health Security
Speaker 1: has been wonderful and giving us a broader perspective on
Speaker 1: this pandemic. Dr Dolge of The Atlantic has written up
Speaker 1: so nicely that Johns Hopkins at work and they talk
Speaker 1: about the path to normal. The numbers are getting better.
Speaker 1: How do you perceive how the win of it, the
Speaker 1: way of it that we get back to normal. I
Speaker 1: think the first thing is really making sure that we
Speaker 1: never get in a position where hospitals go into crisis again.
Speaker 1: And towards that is get vaccine into the arms of
Speaker 1: all the nursing home residents, all the vulnerable adults that
Speaker 1: live in the community, and that will will really change
Speaker 1: the perception because then you tame the virus. It's unable
Speaker 1: to kill at the rate that it's doing, and that's
Speaker 1: going to allow a lot more freedom to do things
Speaker 1: without worrying about passing this onto somebody that could get
Speaker 1: very ill or you yourself getting ill. Then I think
Speaker 1: the next step is really getting cases to a or
Speaker 1: level by vaccinating the population, just really making this more
Speaker 1: like one of our respiratory viruses that we deal with
Speaker 1: every year. It's not going to go away, It's just
Speaker 1: gonna become much more manageable on deaths. If the horror
Speaker 1: was four thousand deaths per day, we're celebrating that we're
Speaker 1: under two thousand deaths per day. Maybe we get under
Speaker 1: one thousand desper day nationally. That's a wonderful outcome. Is
Speaker 1: the virus still out there? Is even if we get
Speaker 1: vaccinated we get better, the numbers improve. Is the things
Speaker 1: still out there? Definitely. You have to remember that this
Speaker 1: is the seventh human coronavirus that's been discovered, and four
Speaker 1: of those coronavirus has caused our commonhold. This is going
Speaker 1: to become something like that. It's gonna be like our
Speaker 1: fifth seasonal coronavirus, and we will still see cases. We
Speaker 1: will still see outbreaks, we will still see debts, but
Speaker 1: they will be nowhere near the levels that we saw
Speaker 1: during the height of this pandemic, or even now once
Speaker 1: we get our mulnerable populations vaccinated. Once it is defanged
Speaker 1: in and more like other respiratory vi but it's not
Speaker 1: going away. It's established itself in the human population. It's endemic.
Speaker 1: There's an animal host that we don't know, an intermediate
Speaker 1: between bats and humans. We still don't know what that is.
Speaker 1: This is not an irradicable or an alimitable disease. Dr Adulga,
Speaker 1: I'm gonna say something that will make John Farrell fall
Speaker 1: office chair and perhaps Tom Keene as well, and be
Speaker 1: really optimistic about the potential here, especially as they come
Speaker 1: up with new advances for the vaccines. The FDA yesterday
Speaker 1: indicating that they would allow a fast track process to
Speaker 1: adapt the vaccines available to any new strains of coronavirus
Speaker 1: as they come out. Are we getting close like securing
Speaker 1: the common cold or being able to vaccinate for a
Speaker 1: whole host of other coronaviruses that are out there. I
Speaker 1: definitely think that the technology that was used to make
Speaker 1: the COVID nineteen vaccine messenger are an air m rn
Speaker 1: A vaccine technology has really made it much a much
Speaker 1: easier process to make vaccines for targets that people hadn't pursued.
Speaker 1: And I do think that we're going to probably see
Speaker 1: somebody go after those coronaviruses that cause our common cold.
Speaker 1: So it won't be all of our common colds, but
Speaker 1: a substantial proportion could be reachable with this new technology.
Speaker 1: With the fact now that we have human coronavirus vaccines,
Speaker 1: but remember the common cold is not just caused by coronavirus.
Speaker 1: Is there a rhinoviruses, metneuma viruses, pair influenza viruses. It's
Speaker 1: a whole group of viruses which will which will still
Speaker 1: be around, so you will still likely still get the cold,
Speaker 1: which is probably less likely to get it from coronaviruses
Speaker 1: once we get more coronavirus vaccines. I gotta say, as
Speaker 1: you talk, it doesn't make me want to go and
Speaker 1: touch people again and hug them and go face to
Speaker 1: face with raises A question of how confident people will
Speaker 1: be once we do get a heart immunity of some
Speaker 1: sort another. I know it's controversial and get out there,
Speaker 1: and it's a question of services and how much they
Speaker 1: can research. Can we go back to the life that
Speaker 1: we lived once or will life be just absolutely changed
Speaker 1: with people having a new awareness of health and spreading
Speaker 1: and an inability to control some of these viruses. I
Speaker 1: definitely think that after any kind of pandemic or infectious
Speaker 1: disease emergency, the population is going to change their perception
Speaker 1: of risk and disease. We've lived pretty much in luxury
Speaker 1: in the United as in many of the developed worlds,
Speaker 1: where we don't worry about infectious diseases every time we
Speaker 1: step out the door interact with the other individuals. So
Speaker 1: there are going to be people who are still reticent
Speaker 1: to get back into it, that may still wear masks
Speaker 1: and face coverings when they're in crowded and congregated places
Speaker 1: on public transportation, even after the rules may may change.
Speaker 1: So I do think that you're going to see people
Speaker 1: just much more attuned to the risk of respiratory viral
Speaker 1: infections after this, and that may take some time to dissipate,
Speaker 1: but many people will get back to what they were doing.
Speaker 1: They're already sort of getting back to what they were doing,
Speaker 1: but it's going to be a different population because we
Speaker 1: had five hundred thousand Americans die and the whole world
Speaker 1: turned upside down by a by a virus. This was
Speaker 1: Lesia's version of Sunshine and Rainbows on a Tuesday morning.
Speaker 1: I'm ixparted to catch out these sam down Jones health kids.
Speaker 1: Thank you. This is the Bloomberg Surveillance Podcast. Thanks for listening.
Speaker 1: Join us live weekdays from seven to ten AMI Eastern
Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from
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Speaker 1: Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and
Speaker 1: of course, on the terminal. I'm Tom keene In. This
Speaker 1: is Bloomberg.